Initial government data fails to alleviate worries that the economy continues to stagnate.
The Office for National Statistics (ONS) announced a mere 0.1% economic growth for the last quarter of 2025, matching the previous quarter’s (July to September) performance and falling short of the 0.2% many economists had anticipated.
December saw economic expansion of just 0.1%, as activity slowed down after the pre-November lull, which was attributed partly to consumer and private sector apprehension before the upcoming budget.
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The statistics appeared even less favorable when growth was assessed per capita, considered a more precise indicator of national living standards, showing a decline in output throughout the latter half of 2025.
Liz McKeown, the ONS director of economic statistics, commented on their findings, stating: “The economy maintained its sluggish growth during the year’s final three months, with no change in the growth rate from the preceding quarter.
“The typically dominant services sector experienced zero growth, with manufacturing serving as the primary impetus for any expansion.
“In contrast, the construction sector recorded its poorest performance in over four years.
“Overall, the growth rate for 2025 registered a slight increase compared to the prior year, with all major sectors observing expansion.
“Preliminary estimates indicate that GDP per capita rose compared to the previous year, notwithstanding a modest contraction in each of the two most recent quarters.”
These figures emerged as the government faces ongoing pressure to stimulate investment, amidst widespread complaints about business expenses mandated by the Treasury that have negatively impacted employment.
Economic growth has been a central tenet of Labour’s agenda since assuming power, yet its management has drawn criticism from various business organizations, particularly within the retail and hospitality industries.
Furthermore, it came to light this week that a high-ranking cabinet member shared this sentiment.
Health Secretary Wes Streeting conveyed to Lord Mandelson in a message last March, revealed by Sky News this week, that the government possessed “no growth strategy whatsoever”.
In a separate development, a report from an MP committee on Wednesday called for several reforms to halt business failures and the decline of the high street, such as reducing costs, reforming business rates, and eliminating delayed payments.
The Business and Trade Committee concluded that small enterprises are currently contending with pressures comparable to, and occasionally more severe than, those faced during the COVID pandemic.
Businesses have largely acknowledged transferring increased employment expenses to consumers, concurrently with the UK’s unemployment rate climbing by a full percentage point to 5.1% since the current government assumed power in 2024.
According to business organizations, investment is being stifled not only by elevated costs but also by broader uncertainties, such as the implications of Donald Trump’s trade dispute.
Chancellor Rachel Reeves remarked on the growth statistics, stating: “Owing to our policy decisions, we have witnessed six interest rate reductions since the election, inflation declining more rapidly than anticipated, and our economy stands as the fastest-growing among the G7 nations in Europe.”
“The Government possesses the appropriate economic strategy to foster a more robust and stable economy, by lowering living costs, reducing national debt, and establishing an environment conducive to growth and investment nationwide.”
Inflation is projected to significantly moderate in the upcoming months, following a year and a half of upward pressure on the rate of price hikes.
However, economists largely anticipate that 2026 will slightly fall short of the 1.3% growth rate observed in 2025.
Yael Selfin, chief economist at KPMG UK, expressed expectations for an uptick in activity over the next few months but projected an overall growth of 1% for the current year.
“Fresh uncertainty has materialized as a threat to this year’s growth forecast. To prevent impeding economic momentum, both households and businesses require stable groundwork and clear policies,” he wrote, echoing calls from opposition groups for the chancellor to reverse business impositions to stimulate private sector investment.